Estimating the ROI of Blockchain Technology

Algorand - Blockchain Payments - July 2022 - Learn how businesses can get the best ROI from blockchain technology

As enterprises and financial institutions (FIs) seek the best return on their investment in payment infrastructure, blockchain technology has become an increasingly diverse and promising area of ​​research.

Among businesses surveyed that operate in 10 or more countries, nearly 69% say they use smart contracts that trigger payments without human intervention when pre-set conditions are met, while more than 31% say they use blockchain technology or cryptocurrencies in the management of its assets. These numbers decrease for businesses operating in fewer countries, and less than 25% of surveyed businesses operating in only two countries use smart contracts for payments.

However, there is interest in expanded use, with 42% of all businesses surveyed saying they use smart contracts for payments, while another 13% said they would be interested in triggering payments with smart contracts.

At the same time, cryptocurrencies are still an area of ​​strong interest worldwide. In the US, 23% of consumers surveyed said they believe crypto is the future of money, compared to 59% in Latin America and 58% in Africa, where long-term hyperinflation is affecting confidence in local currencies. While recent volatility may dampen enthusiasm for cryptocurrencies, central bank digital currencies (CBDCs) and other blockchain-based payments appear to hold promise for a more stable use case with the same cost and speed advantages of crypto. Ninety percent of institutional investors surveyed said the past three years have seen more interest not only in cryptocurrencies, but also in CBDCs and enterprise blockchains.

This month, PYMNTS Intelligence looks at the data businesses need to consider when evaluating the potential return on investment (ROI) of blockchain technology and the trends that will shape the future of digital currencies.

Blockchain payments beyond crypto

Algorand - Blockchain Payments - July 2022 - Learn how businesses can get the best ROI from blockchain technologyCryptocurrencies have yet to capture a significant portion of payments. While those who say they owned crypto grew from 16% in 2021 to 23% by early 2022, more than half of crypto owners still see it primarily as a form of investment. However, the use of cryptocurrency has shown the potential of blockchain payments in terms of speed and cost. The impact was significant enough that 37% of users surveyed said they believe blockchain technology allows for faster payments, and 68% of those who have used crypto share this opinion. In addition, 82% of CFOs and CFOs said crypto payments are settled faster than non-crypto payments, and 88% of merchants surveyed said they had faster crypto payments. While crypto may not be making significant gains as a transactional currency in North America, interest is higher in other regions. Only 19% of small businesses surveyed in the US and 8% of those in Canada said they wanted to enable crypto payments in the near term, but that percentage rose to 30% in Brazil, Hong Kong, Singapore and the United Arab Emirates.

Algorand - Blockchain Payments - July 2022 - Learn how businesses can get the best ROI from blockchain technology

Many of the speed and reliability benefits associated with cryptocurrency also apply to other blockchain payments, with smart contracts reducing the need for intermediaries and 90% of central banks surveyed looking at implementing a CBDC. The majority of central banks in “advanced economies”, including the US and Japan, have said there may be a future in stablecoin payments pegged and backed by fiat currency. Sixty percent of all respondents were much less impressed with cryptocurrencies, saying they have “trivial or no benefit” in domestic payments, and 40% gave the same prediction for cryptocurrencies in cross-border payments. Some central banks considering CBDCs are most interested in digital currency as a means to catalyze innovation, while others are looking to it as a complement to existing monetary systems.

The growing role of blockchain payments

However, the number of potential uses of blockchain in all types of transactions may be limitless. Some even compare the emergence of blockchain to the rise of the Internet itself. Blockchain is expected to change everything from the way transactions are made to the way data of all kinds is stored, accessed and shared. It can change, for example, supply chain management, contract brokerage and all forms of asset trading. In the case of payments, this means that blockchain is not only the source of new currencies, but also plays a role in how currencies and assets of all kinds are transacted.

It’s no surprise, then, that 73% of respondents to a Deloitte CEO survey focused on the financial services industry said they were concerned about losing a competitive advantage if their organizations didn’t adopt blockchain and digital assets. Eighty percent say they expect digital assets to be either very or somewhat important in their respective industries over the next two years, and 43% of respondents in the financial services sector say digital assets have a very important role for their organizations in terms of the new payment options. Respondents also demonstrated a positive view of how far blockchain technology has come, with a total of 81% saying the technology is widely scalable and has achieved mass adoption. The question of whether to invest in blockchain technology seems It has largely taken hold in the financial industry, with companies having to decide how and when to invest while weighing immediate costs against the risk of falling behind competitors.

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